NHEC sues device manufacturer
By BEA LEWIS, for THE LACONIA DAILY SUN
PLYMOUTH – The New Hampshire Electric Cooperative claims the 83,000 "smart" meters it bought as part of a multi-million-dollar system upgrade are defective, and have flooded their dispatch center with erroneous electronic messages reporting power outages.
The complaint filed Wednesday in U.S. District Court in Concord, names as plaintiffs Elster Solutions LLC, the North Carolina-based manufacturer of the allegedly flawed Type RS2 digital meters, as well as Honeywell International Inc., headquartered in New Jersey, who acquired Elster in a $5.1 billion deal announced in July 2015.
Prior to its sale, Elster claimed between 2001 and 2011 to have deployed more than 200 million metering devices worldwide, making it one of the largest electricity gas and water measurement and control providers.
The meters at issue in the suit, were purchased as part of a $35 million Advanced Metering Infrastructure project the member-owned and controlled electric distribution utility undertook to provide better service. The intent was twofold, to bolster operational efficiency and to improve outage reporting and management.
The nonprofit rural electric cooperative picked the Elster platform because it is capable of providing advanced services in the future, including allowing the NHEC and its members the ability to manage their energy usage during peak pricing periods by alerting consumers to the costliest hours of the day to use electricity.
The suit claims Elster continued to supply the NHEC with defective meters even after discovering the problem, and may even have been aware that a defect existed at the time it signed the contract with the state's second largest utility, headquartered in Plymouth.
Attorneys Edward M. Kaplan and Derek D. Lick of Sulloway & Hollis PLLC of Concord, assert that NHEC was "compelled" to file suit, because Elster sold them meters known to contain a manufacturing defect, making them prone to failure, undermining the reliability and core functionality of the Cooperative's entire smart grid system.
"We are aware of a complaint by the New Hampshire Electrical Cooperative, and while as a matter of policy Honeywell does not discuss pending litigation, we stand behind the quality of our products, and the service and support we offer our customers. Elster was acquired by Honeywell in January of this year," said Bruce Anderson Director of Public Relations for Honeywell.
The NHEC notified the state's Public Utilities Commission that it was launching litigation against the meter maker on Wednesday, the same day the suit was filed, said Amanda Noonan, Director of Consumer Services and External Affairs for the PUC. As a rural electric cooperative, Noonan said, the NHEC is subject to different types of regulation and that they didn't need PUC approval for meters they plan to install. They PUC does however review capital investments made by the NHEC to assure that they are prudent, she said.
The suit asserts that the meters that work in conjunction with a new communication "backbone" including a microwave and fiber optic network connecting 20 tower sites, are an integral component of the Smart Grid Project.
Unlike traditional meters that must be individually read manually by a NHEC employee physically going to a property, the smart meters, relay encrypted power consumption statistics wirelessly several times a day. When working properly, the meters are also designed to send a "last gasp" signal reporting a loss of power, allowing the NHEC to promptly send a repair crew to the precise affected area.
According to the NHEC, the defect does not affect meter accuracy.
"NHEC has always had internal procedures/processes to test and assure that each meter is properly reading/counting kilowatt hour useage – regardless of the type of meter used," said company spokesman Seth Wheeler. "These best-practice procedures remain in place today. If, for any reason, a meter fails to report its usage, NHEC has internal prodecures to get the usage data or use a process to estimate the bill based on hourly data previously reported."
NHEC signed a contract with Elster in February 2011 to provide the meters and software necessary for their integration into the overall electrical system. According to the suit, the NHEC relied on representations by Elster that its meters had a failure rate of 3/10ths of one percent or less. Based on that representation the NHEC believed that only 250 of the meters would be expected to fail over the 20-year period the manufactured cited as the expected lifespan of its product.
The NHEC began replacing its old meters with those made by Elster in June 2011, with the manufacturer supplying about 5,000 a month to allow for rolling installations throughout the 115 towns and cities that the cooperative serves.
In March 2012, after NHEC had installed about 50,000 of the new meters, Elster issued a formal bulletin announcing that a manufacturing defect had been identified in the main circuit board on the type of meters NHEC had purchased. The bulletin detailed that the defect manifested itself in three different ways, including that the "meter indicated that there is a power outage when one is not present and stops communicating," or the is data stops being added and shows zero consumption.
Elster initially told NHEC that 54,000 of the 83,000 meters it had bought were affected by manufacturer defects. The suit says Elster later advised the NHEC that the problems were traced to a too small computer chip that was replaced with a larger one during the manufacturing process, and that it cured the defect. All 83,000 of the meters bought by NHEC contained the defective small chip, the suit charges.
The NHEC is making claims for breach of contract, breach of the covenant of good faith and fair dealing, breach of implied warranty of fitness for a particular purpose, unjust enrichment, fraudulent misrepresentation/concealment, negligent misrepresentation, and breach of the N.H. Consumer Protection Act.
Shortly after the contract was signed, Mark Munday, president and CEO of Elster, said the company had successfully deployed Smart Grid projects of different sizes across varied terrains, helping utilities around the world improve both energy delivery and customer service and was bringing "this depth of experience" to the NHEC project.
"NHEC understands the importance of ensuring its Smart Grid deployment is done right the first time and that members are engaged in its many benefits," Munday said in a press release posted on his company's web site dated Feb. 24, 2011.
The N.H. Electric Cooperative has filed a lawsuit against Elster, the manufacturer of its new Type RS2 digital meters claiming they are failing as a result of a manufacturing defect. (Bea Lewis/for The Laconia Daily Sun)
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